The recent Upper Tribunal decision in Payne and others v Maldon District Council presented a welcome reminder for developers: that section 84 orders remains their ally.
Restrictive covenants can often present an unwelcome barrier for developers, especially when contained in old conveyances. Their presence can restrict the development of land where the owner of the land with the benefit of the covenant either refuses consent, or cannot be tracked down, or where other remedies such as obtaining title indemnity insurance are unavailable.
In many circumstances, the better approach will be to apply to the Upper Tribunal under section 84 of the Law of Property Act 1925 to modify or discharge the covenant to permit development.
Under section 84, The Upper Tribunal can discharge or modify the restriction if satisfied that one of the following grounds applies:
- The covenant is obsolete (section 84(1)(a), LPA 1925).
- The covenant impedes some reasonable use of the land (section 84(1)(aa), LPA 1925).
- The beneficiaries expressly or impliedly agree (section 84(1)(b), LPA 1925).
- No injury will be caused (section 84(1)(c), LPA 1925).
The case of Payne and others v Maldon District Council illustrated the continued importance of section 84 which, in this case, resulted in a modification of a pre-1991 planning agreement enabling a residential development to proceed.
The applicants’ land had been granted outline planning permission for a residential development.
However, the land was already subject to a restriction in a section 52 agreement preventing the erection of ‘permanent buildings or structures’ emanating from a 1984 planning agreement between Maldon District Council and the previous owner.
The applicants applied to the Upper Tribunal under section 84 of the Law of Property Act 1925 relying on ground (aa) – that the restrictive covenant impeded some reasonable use of the land and did not secure any practical benefit of ‘substantial value or advantage’ to the council.
In applying the statutory test under section 84(1)(aa), the Upper Tribunal held that the rules were satisfied and as such, the residential development should not be stopped by the restriction and they ruled to modify the restriction.
In this case, the proposed user of the land was significantly at issue. The Upper Tribunal noted that while the grant of outline planning permission is not determinative of a user being reasonable, it did provide the applicants with a good starting argument. Perhaps more importantly, they also agreed with the planning inspector who granted the planning permission in that the development would provide much needed affordable housing in a suitable location. This argument outweighed the respondents’ argument that the development was outside the development boundary and therefore contrary to the plan.
Further, the Upper Tribunal noted that while the 1984 planning agreement conferred a practical benefit to the council, it could not be of substantial value or advantage to the council to restrict the development of housing which its district so badly needs.
The grant of planning permission to developers may not always remove all impediments from its progress. Developers have to be alert to the presence of restrictive covenants in historic conveyances and other legal documents and their potential impact to halt even the best of plans of developments. It is therefore imperative that developers carry out due diligence to identify any restrictive covenants which may prevent plans being carried through.
Although legislation prevents the use of section 84 applications to discharge or modify restrictions in section 106 agreements, this case did reinforce that where there are problematic restrictions in older (pre – 1991) planning agreements, a section 84 application remains a viable option and, encouragingly, that the courts will take a practical yet systematic approach to them. Gone is the fiction that courts will be complicit in maintaining and enforcing old restrictive covenants. Now, the fact that the Tribunal is permitted under section 84, to discharge or modify restrictions in a section 52 agreement, and to take in to account wider planning concerns when doing so, means this should always be considered as a preferable forum for developers to gain help in continuing with the housing developments our society so desperately needs.